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What is the mortgage debt ratio for a potential borrower who earns $72,000 per year if she applies for a mortgage that requires principal and interest payments of $1,800 per month, the property taxes of the house she wants to buy are $400 per month, and the property insurance is $150 per month. 30% 27% 39% 40%

What is the mortgage debt ratio for a potential borrower who earns $72,000 per year if she applies for a mortgage that requires principal and interest payments of $1,800 per month, the property taxes of the house she wants to buy are $400 per month, and the property insurance is $150 per month. 30% 27% 39% 40%

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Assume that you can get an interest-only mortgage with no money down. You are considering to buy a house or to rent an apartment. The apartment rents for $900 per month. You estimate the monthly property tax to be $200 and the monthly interest on your interest-only loan to be $750. Your tax rate is 20%. You also have to pay $75 per month in maintenance costs and $125 per month in property insurance if you own. Should you buy the house or rent the apartment based on these numbers, assuming that you cannot make a profit from the sale of the property? (Also, ignore all emotional factors and assume that you can itemize all your deductions.) You are indifferent because the two options cost exactly the same per month. You should rent because the $900 rent is less than the monthly cost town. You should rent because the $900 rent is more than the monthly cost to own. You should buy because buying is financially always the better option. re
Transcribed Image Text:Assume that you can get an interest-only mortgage with no money down. You are considering to buy a house or to rent an apartment. The apartment rents for $900 per month. You estimate the monthly property tax to be $200 and the monthly interest on your interest-only loan to be $750. Your tax rate is 20%. You also have to pay $75 per month in maintenance costs and $125 per month in property insurance if you own. Should you buy the house or rent the apartment based on these numbers, assuming that you cannot make a profit from the sale of the property? (Also, ignore all emotional factors and assume that you can itemize all your deductions.) You are indifferent because the two options cost exactly the same per month. You should rent because the $900 rent is less than the monthly cost town. You should rent because the $900 rent is more than the monthly cost to own. You should buy because buying is financially always the better option. re
What is the mortgage debt ratio for a potential borrower who earns $72,000 per year if she applies for a mortgage that requires principal and interest payments of $1,800 per month, the property taxes of the house she wants to buy are $400 per month, and the property insurance is $150 per month. 30% 27% 39% 40%
Transcribed Image Text:What is the mortgage debt ratio for a potential borrower who earns $72,000 per year if she applies for a mortgage that requires principal and interest payments of $1,800 per month, the property taxes of the house she wants to buy are $400 per month, and the property insurance is $150 per month. 30% 27% 39% 40%
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